In re: AXA Equitable Life Insurance Company

Background

Policyholders sued AXA over an increase in the “cost of insurance,” a monthly charge deducted from the value of certain universal life insurance policies. They also alleged that AXA issued false or misleading policy illustrations. The court had previously certified a nationwide class for policy-based claims, a nationwide class for illustration-based claims under New York Insurance Law Section 4226, and a New York subclass for claims under New York General Business Law Section 349.

In an earlier summary-judgment decision, the court had ruled that Wells Fargo, which held many of the policies as a registered owner and securities intermediary, had standing to pursue illustration-based claims. AXA sought reconsideration of that ruling. The class plaintiffs and LSH Plaintiffs, including Wells Fargo and LSH Co., opposed the motion. AXA also asked the court to decertify or modify the illustration-based class, decertify the New York subclass for lack of sufficient size, and permit discovery from absent class members.

Standing ruling

The court granted AXA’s motion for reconsideration regarding Wells Fargo’s standing. Article III standing is the constitutional requirement that a plaintiff show a personal, concrete injury that can be addressed by a federal court. The court concluded that Wells Fargo lacked that injury for the illustration-based claims.

The court rejected the argument that Wells Fargo was injured because it held title to the policy accounts. It found that Wells Fargo held the accounts in a ministerial capacity and that the beneficial owners, rather than Wells Fargo, incurred any financial harm from the alleged overcharges. The opinion also notes that the parties did not dispute that Wells Fargo’s fees as securities intermediary were not affected by the cost-of-insurance increase.

The court distinguished Wells Fargo’s contract-based claims. It explained that Wells Fargo could have standing for a contract claim because it was AXA’s contractual counterparty, while the illustration-based claims were not based on a contract to which Wells Fargo was a party. The court also rejected arguments that Wells Fargo had standing based on indirect exposure to the illustrations, the injuries of the beneficial owners, or an agreement giving Wells Fargo authority to sue. The court found that the agreement did not assign ownership of the claims and that the relationship between Wells Fargo and the beneficial owners did not support third-party standing.

Class and discovery requests

The court dismissed the illustration-based claims brought by Wells Fargo as a securities intermediary for lack of Article III standing. It did not, however, decide AXA’s request to decertify or modify the nationwide Illustration-Based Claims Class. The court recognized that the standing ruling could affect the class, but chose to give the parties an opportunity for further briefing rather than immediately decertifying it.

The court also reserved judgment on AXA’s request to decertify the New York Illustration-Based Claims Sub-Class for failing to satisfy the numerosity requirement. Although the subclass had fewer than the forty members at which numerosity is presumed in the Second Circuit, the court noted that there is no fixed minimum number and that judicial efficiency may support class treatment.

The court likewise reserved judgment on AXA’s request for discovery from absent class members because that request could be affected, or become unnecessary, depending on the outcome of the class-certification issues. Class Plaintiffs were ordered to file a memorandum addressing those issues, followed by AXA’s response. Judge Furman directed the Clerk of Court to terminate the specified docket entries in the two related actions.